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The new tax year began last week, and with it comes a raft of changes which will affect all of our personal finances.

So whether you’re saving up for a new car, your dream holiday, or a deposit for a new house, this is our guide to what the changes will mean for you.

Income tax

Good news, as changes to the tax system have effectively given all workers a pay rise.

The personal tax allowance has risen by £400 - meaning workers can now earn £11,000 before having to pay a penny of income tax.

There's further good news for higher earners, as the threshold at which you start to pay 40% tax has been lifted from £42,385 to £43,000.

And the changes will also affect married couples - an increase to the marriage allowance means some couples will have their combined tax bills reduced.

The allowance, which has risen to £1,100, can be transferred from one partner earning £11,000 or less (and who therefore pays no tax anyway) to their husband, wife or civil partner who pays basic rate tax.


More pay in workers’ pockets means more money to set aside for that big purchase. So what does the new tax year mean for savers?

  • No increase to the ISA allowance 
    For the first time in several years, there is no increase to the amount you can invest in a tax-free ISA during the tax year, which stays at £15,240.
    But this will be more than offset by the new personal savings allowance, which will enable basic rate tax payers to earn income of up to £1,000 a year on their savings tax-free, and higher rate taxpayers £500. 
  • Lifetime ISA 
    Savers will have to wait until April 2017 to open a Lifetime ISA, which pays out a 25% bonus on savings used for a deposit on a new home.
  • Help to Buy ISA 
    While awaiting the introduction of the Lifetime ISA, those saving up to buy a new house can put their money in a Help to Buy ISA, which also pays a 25% bonus on savings used for a deposit on a new home. The Help to Buy ISA limits contributions to £200 a month, as opposed to the £4,000 a year limit on the Lifetime ISA.


New national living wage

Workers on the minimum wage have received a boost to their pay packets with the introduction of the new national living wage.

Employees aged 25 and over will now be paid at least £7.20 an hour, up from the previous minimum of £6.70.

Meanwhile, minimum wage for those aged 21 to 25 will rise from £6.70 to £6.90 in October.

Want to know more?

For more details, see the government's guide to the changes for the 2016 tax year.


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